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There are many forms which your charitable gift may take and, at the same time, address your own personal financial needs. This might include the need to reduce income or estate tax, the need for income, the need to eliminate an appreciated asset, etc. The gifting technique chosen should help you accomplish your goal through a very personalized strategy and provide the benefits you are looking for. Of course with all gifts, they start with your good feelings about the work done by your favorite charity and usually a Planned Gift is extra special as you become a member of a giving society.

Examples:

Overall goal – Achieve a year end tax deduction for 2008 and also yearly income which is tax advantaged by making a gift to your charity.

Solution One - The Charitable Gift Annuity (CGA) i.e. A 70 year old giving a gift of $10,000 will receive a charitable deduction of $3,988 while receiving income for life of $610 (6.1%) per year. In addition $378.20 of the income is tax free for 15.9 years. An 80 year old giving a gift of $10,000 will receive a charitable deduction of $4,961.10, while receiving income for life of $760 (7.6%) per year. In addition $535.80 of the income is tax free for 9.4 years. The CGA may also be funded for the joint lives of two people. More importantly you have the knowledge that the residuum will go to the charity to help them with their good work.

Solution Two – Using a Charitable Trust. There are different trusts which may be incorporated, however, the amount of money you would need to efficiently fund the trust is significantly higher compared to a CGA. That being said either a Charitable Annuity Trust or a Charitable Unitrust will accomplish your goal.

Overall goal is the reduction of taxes on a qualified plan or IRA (Retirement Assets). Qualified Plans and IRAs have the heaviest taxation rate. In many cases, after your home, your next largest asset may be one of the plans. As the solutions to this goal are many and somewhat detailed I did not try to cover them but rather to make you aware that they do exist. Also, with the extension of the Charitable IRA legislation you have available another great planning tool.

Other areas to consider are Gifts including: Appreciated Assets, Personal Property, Bequests, Life Insurance, Charitable Lead Trusts and Retained Life Estates plus some interesting uses of annuities.

James E. Meyer

Partner, Greco Planning

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Tags: charitable giving, charitable ira, charity, contributions, james meyer, personal finance, tax reductions

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This entry was posted on Wednesday, November 12th, 2008 at 10:26 pm and is filed under charity. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.